Report

Bridge over troubled water

The role of Victoria’s infrastructure pipeline during the COVID-19 recession
Publisher
Capital investments COVID-19 Economic depressions Pandemics Disease management Government expenditure State governments Infrastructure Public health Victoria
Description

The COVID-19 pandemic caused Australia’s first recession in a generation, including the largest ever quarterly fall in gross domestic product on record during the June quarter of 2020. These falls were replicated at a state level, however in Victoria the second wave of COVID-19 infections and subsequent extended stay at home orders and other public health restrictions needed to actively suppress the virus extended that economic downturn longer than other States and Territories. Victoria was the only state or territory to show negative growth in state final demand during the period December 2019 to March 2021.

Detailed analysis of the latest National Accounts from the Australian Bureau of Statistics shows that the contraction of economic demand in Victoria during the COVID-19 recession was not evenly spread. While household expenditure and private capital investment both fell in absolute terms during this period, government expenditure and public capital investment grew.

However, public capital investment was not evenly spread between the different levels of government. State Government infrastructure investment was the overwhelming driver of demand in Victoria during the COVID-19 recession, increasing by 33% between December 2019 and March 2021. During the same period capital investment in Victoria by the Commonwealth Government went backwards, as measured by the ABS in the National Accounts.

There has been a step change in the level of state government infrastructure investment since the election of the Andrews Government in 2014, with Victorian Budget papers showing a doubling of investment in the last six years compared with the decade prior. While there are issues with costs and other project management issues that need to be addressed, Victoria’s infrastructure pipeline is providing considerable ballast to the state’s economy during an extended period of economic uncertainty.

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